Report calls for more transparency in CFC fees

Jan. 21, 2013 - 05:50PM
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The federations that have assumed a growing role in the Combined Federal Campaign need to do a better job of disclosing the fees they charge charities, a new report contends.

To recover their overhead costs, federations — nonprofit organizations that perform a variety of services on behalf of CFC charities — often deduct those fees from donors’ pledges before they get to the intended charities.

Although many federations “make a good-faith effort” to explain how fees are calculated, “it can be difficult to compare one price-tag with another,” according to the report, which will be released Tuesday by the Workplace Giving Alliance, a Massachusetts-based organization that includes a dozen national and local CFC federations. The alliance provided an advance copy to Federal Times.

There are dozens of national federations that provide charities administrative and marketing services and help navigate the paperwork needed to join the campaign.

But the federations differ widely in how — and whether — they disclose information on the fees they charge charities for those services. One federation posted no information on its website, while others did so in different formats.

Many set the fees as a percentage of CFC pledges made to a given charity, often between 4 percent and 8 percent. A federation’s percentage cut could be higher if a federation charges a flat minimum fee.

Those federation fees are in addition to the fees charities pay to local CFC campaigns, which amount to 10 percent on average.

“We have suggested to [Office of Personnel Management] that it move more aggressively to require federations to make clear what they will charge their charity members,” the report says.

OPM intends to propose a vast overhaul of the CFC. A draft of those reforms, obtained by Federal Times, calls for holding the CFC campaign a month later in the year, streamlining the CFC’s organization, and switching to only electronic pledges, among other things. The draft reforms also call for more transparency in the fees that federations charge their charities.

Specifically, OPM’s draft proposal could force federations to bill charities directly for their fees. Currently, federations are given the pledges by feds made to their charities and the federations remove their cut before handing those pledges on to the charities themselves. The current process creates confusion and uncertainty for both charities and feds over how much is pledged to any given charity and how much of that money goes to overhead costs.

The report by the Workplace Giving Alliance endorses that approach. “We believe this change will drive federations toward a much more complete disclosure of the amounts they are withholding from their members since federations will simply have to issue bills,” the report says.